Many business and organizational leaders are dissatisfied with the current limitations of risk management practices, and pensions are not exempt from this worry.
But just like an engineer building a bridge using only statistics needs to consider what happens in the case of an earthquake, rather than just what happens during the average rush hour, leaders also need to consider the likelihood of a large scale event getting in the way of perfect predictions when it comes to pension management. With medical science and big data, we may be able to better pinpoint individual lifespans, and, therefore, what the optimal age of retirement should be, but we still need to take this data with a grain of salt.
In our new paper on how actuarial decisions on pensions need leadership guidance 2019, we look at the right way to structure pensions in the light of actuarial science and hard numbers. While actuarial thinking is the key to pension resilience, leaders may also need to use broader and more unconventional methods to get to the heart of the data and use it in the right way to build a pension plan that will last, and that will limit their exposure. What we need to know is that the data that actuaries collect and use is not always the be-all-and-end-all of our decision making process, but it’s possible to find the right balance.
What this means is that a leader can bring the conversation back to risk, market performance and viability over the long term in order to shift the focus of the work towards what their business needs rather than what an actuary thinks is important. Leaders have to consider pension issues such as compounding interest, the rate of returns and inflationary spirals instead of facts such as when people are likely to retire.
At Marris Miller, we know that it is always the unknown unknowns that impact performance, which means that true resilience comes from managing the unexpected. We help your company understand the true actuarial cost of retirement financial need so that you can act accordingly.